Xero treats US market with caution

UK sales targets achieved twice over

Xero's global growth has smashed target after target, but in marking its 10,000th customer, co-founder Hamish Edwards warns the next target, the United States, will not be easy.

At the online accounting software company's annual meeting in Wellington yesterday, Edwards reviewed his past two years captaining Xero's entrance into Britain. With 4000 customers in the new market, it made up almost half of Xero's customer count and more than half of its revenue was from overseas.

Sales targets for the British market were achieved twice over, and Edwards said the lessons they had learnt there set them up to be the market leader.

But he was guarded on overselling hopes for expansion into the US in 2010. "It would be blase to say we could go into the US with no risk. It's been a graveyard for a lot of great companies. The UK gives us a little more confidence ... it gives us a comparable business model."

A multi-currency function introduced last month was popular in the British market. It dealt between euros and sterling, and brought Xero neck and neck with its competitors.

Improving the product beyond that was centred in the "Xero way" of making accounting functions easier, Edwards said.

"Where do we take it next? We do more of the same."

He said the 10,000-strong customer base provided comprehensive feedback on what they wanted and direction for improving the product.

Chief executive Rod Drury said the milestone of 10,000 effectively cast off the start-up tag for Xero, which was set up three years ago before a $15 million public listing in 2007.

Shares lingered at about 30 per cent below the $1 listing price for the first 20 months before news of MYOB founder Craig Winkler taking a cornerstone shareholding pushed it up to $1.50 this year.

Xero shares closed at $1.43 yesterday, up 2 percent.

Based on current cost levels, the breakeven estimate of 30,000 customers was expected to be reached within two years, but that was a moving target.

He promised shareholders that Xero planned to invest aggressively to boost market share and was not focused on revenues in the short term.

"We've come to the end of the beginning. Now we can start to move the goalposts and move the game, which is exciting."

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